I recently wrote a post on whether to quote hourly or project rates to clients. Today’s post will cover how to determine what hourly rate to charge, even if you only quote by project.
- How much do you want to make per year as a freelance writer? Let’s say you’re comfortable with a goal of $30,000 to start.
- Next, add up your yearly expenses for your business. You may not have any idea what to calculate here if you’re new at freelancing, so estimate based on what you may pay currently from a personal standpoint. Yearly expenses include:
- Office expenses (phone, Internet, computer hardware/software, cell phone, supplies)
- Insurance (health, car, disability, etc.)
- Accounting/legal services
- Marketing/advertising expenses
- Add these two numbers together to calculate your gross income. This is what you must earn in order to actually make $30K in a given year. If you don’t include expenses and only shoot for the $30K, you’ll have a rude surprise when you realize you don’t have as much money to work with as you thought. For this example, let’s assume expense are at $10,000 per year. Your new annual income goal is now $40,000.
- Next, determine how many days per week you want to work. Let’s start with 5 days per week.
- 5 days x 8 hours = 40 hours. Except you won’t be doing billable work for those 8 hours. Let’s assume you’ll only work on billable projects for half the time = 4 hours. Now, every week you have 20 billable hours you’ve worked.
- How many weeks per year are you will to ply your trade? Again, let’s assume that between holidays, sick days, vacation days and a few unexpected days off, you’ll average 48 weeks out of the year.
- 48 weeks x 20 hours per week = 960 hours per year on the client’s clock. Doesn’t sound like much, does it?
- $40,000 / 960 hours = $41..66666 – not the number to quote a client. You can round up to $45 or even $50 per hour, just for fun.
This translates to needing to make (roughly) $200 per day, $1,000 per week, $4,000 per month and with rounding up to $50 per hour, $48,000 per year. Oh boy, a bonus!
Now that you have the calculations necessary to determine your hourly rate, you can play with the numbers to see what happens if you work fewer or more hours, raise your hourly rate without changing the number of billable hours, etc.
The point of this exercise is to break down the income components into understandable numbers.
Can you make $200 per day 5 days per week?